Early to mid-November was been a great time to be invested in Aurora Cannabis (NYSE:ACB). After a spectacular upside move in ACB stock on Nov. 6, it looks like the share price was set to go even higher.
Some folks might think that ACB stock, and pot stocks generally, are surging because drugmakers Pfizer (NYSE:PFE) and Germany-based BioNTech SE (NASDAQ:BNTX) announced “success” in the first interim analysis from a Phase 3 study of their novel coronavirus vaccine candidate, BNT162b2.
That’s undoubtedly good news, but it’s not necessarily the main reason for the bullish sentiment surrounding marijuana stocks like ACB. After all, people haven’t typically been waiting for a Covid-19 vaccine in order to use cannabis products.
In actuality, the chief driver of ultra-bullish sentiment with ACB stock may have a political aspect. And the problem with politics is that it can be ugly, unpredictable and, in the final analysis, difficult to base investments on.
A Closer Look at ACB Stock
The market’s sentiment surrounding ABC stock was nothing short of euphoric on Nov. 6 as the share price rose more than 50% on that exciting day.
One might expect the market to cough up some of those gains on the following trading day. Yet, as it turns out, Nov. 9 was a continuation day, not a retracement day.
On the morning of Nov. 9, ACB stock added around 30% and was trading between $12 and $13 per share. Keep in mind, that’s in addition to the astounding gains already made on Nov. 6.
It just goes to show that the trend is, indeed, oftentimes your friend. As long as the trajectory is to the upside and the trading volume remains strong, it’s reasonably safe to expect the bulls to be in control of the price action with ACB stock.
So, from a technical perspective at least, the outlook appears to be quite bullish. Now, however, it’s appropriate to consider what catalyzed this extraordinary price movement in the first place.
Betting on Biden
No matter what side of the political fence you might happen to sit on, there’s one thing we can all agree on. It’s been a crazy, exhausting and heavily contested election.
The results will likely be disputed for a while, but for the time being, it appears that Joseph Biden will be the next president and Kamala Harris will be the next vice president of the United States.
This, more than the possibility of drugmakers discovering a primising Covid-19 vaccine, is probably what’s catalyzed the massive move in marijuana stocks generally and ACB stock in particular.
In other words, pot-stock traders are betting on Biden and Harris taking a permissive stance toward cannabis legislation. Without a doubt, they’re recalling the time when Harris declared that she is no advocate of “half-steppin’” when it comes to marijuana law reform.
Don’t Get Too Excited
One thing to bear in mind is that while Harris made pronouncements seemingly in favor of relaxed cannabis laws, Biden was not as vocal about this topic.
Will Harris be willing and able to convince Biden to pursue marijuana decriminalization? That’s not predictable, but it appears that the market has already priced in a victory in this regard.
ACB stock bulls would point out that five U.S. states (Arizona, Mississippi, Montana, New Jersey and South Dakota) recently voted in favor of some form of cannabis legalization. Consequently, the U.S. now has 15 states which have approved cannabis for adult use.
Nevertheless, cannabis remains a Schedule I drug on a federal level. Regardless of what the voters in the individual states decide, cannabis is still illegal to sell and consume in the U.S.
So, let’s not get overly excited about ACB stock just yet. I feel that it’s fine to take a small position, but I wouldn’t recommend loading the boat with ACB shares.
The Bottom Line
It’s tempting to make assumptions and think too far ahead as the trading community gets swept up in pro-cannabis mania.
Despite the widespread euphoria, caution and moderation will be the key to success with your position in ACB stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
